Regional: Challenges and opportunities of liquefied gas for power generation in the Central American region.

• Published date: 18 April 2023
• Law Firm: Consortium Legal

By: María Alejandra Tulipano and Gustavo Vega

Regional energy strategies and sustainable development objectives in the countries of the Central American region have as a priority the diversification of their energy matrices. In this context, the alternatives for diversification include the participation of renewable energies, such as solar, wind and geothermal; as well as the integration of generation plants based on traditional hydrocarbon-based energies, including high efficiency technologies such as gas turbines. Because of its efficiency, supply reliability and price, natural gas is a very effective option for diversifying the region’s energy matrix.

There are several reasons to consider the introduction of gas as an alternative for electricity generation in Central America:

1. The abundance of reserves distributed in different countries of the world;
2. The successful international experience in including gas as an energy option for applications in the residential, commercial, industrial, transportation and generation sectors;
3. Rapid integration into the energy matrix of countries at competitive prices.

Alternatives for introducing natural gas in Central America

Several studies and development strategies, including some of the IDB proposals, analyze the convenience of introducing natural gas in Central America. The strategies evaluated have a demand concentration approach to market development in Central America, such as, but not limited to:

1. Stand-alone projects: Consists of the development of the gas market independently in each of the countries of the region.
2. Regional integration: It contemplates the regional coordination for the commercialization of electricity or gas among the countries.
3. Integration with Mexico: Similar to the previous alternative, it is based on regional integration for the purchase and distribution of gas or electricity between countries.

In order to achieve the integration of the Central American liquefied gas market, it is necessary to standardize national regulatory frameworks and develop a common framework for the entire region. Although countries such as Honduras and Guatemala have basic regulations, it is necessary to standardize the regulatory framework in all countries and define the entities that will exercise the functions of market regulation and oversight. According to IDB studies, the regional framework can be made up of at least four elements:

1. ...